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Slow but sustained growth predicted for local construction sector

Monday 12 Feb 2018

The recovery in the Northern Ireland construction industry continued last year, with an estimated rise in output of 11% to just under £2.9bn in 2015 prices which was the best outturn since 2008 according to the Construction Skills Network (CSN) report, the UK’s most comprehensive and up to date sector forecast.

The public housing sector remained buoyant with a third consecutive year of double-digit output increases, and robust growth was seen in the private housing and commercial construction sectors.

Almost inevitably after a period of strong recovery, output growth is projected to slow over the next few years, and average 0.5% a year over the 2018 to 2022 period, but sustain a level not far short of £3bn (2015 prices), the best performance since 2008. The engines of expansion are expected to be the housing (public and private) and repair & maintenance (R&M) sectors.

The private housing sector is likely to see much more modest growth, of around 0.8% a year over the forecast period. There are some very big projects either on site or in the pipeline at Newtownards, Coleraine, and Ballyclare, amongst others. However, they are all long-term, with output spread over many years, thus have only a moderate impact on year-on-year growth. Nevertheless, output is projected to be in the £530m to £560m region (2015 prices) a year over the forecast period, the best sustained level of activity since 2010.
The public housing sector will be driven by the Northern Ireland Executive’s plans to build 1,600 new social and affordable housing units. This target is being delivered in partnership with organisations such as Clanmill Housing Group, which has some 900 units on site or due to start within the next year. Output growth is predicted to average close to 6% a year over the 2018 to 2022 period.
While over the past 25 years the R&M sectors have fared better in Northern Ireland compared with the UK, a similar level of R&M growth in both geographies is expected going forward as the share in NI has now reached the same level as in the UK, and weaker economic growth and some retrenchment in disposable incomes are likely to affect expenditure in the sector.

Construction employment in Northern Ireland is expected to fall by 0.4% a year on average over the forecast period, to around 61,770 in 2022, after peaking in 2019 at close to 63,500. The professional occupations are predicted to see growth overall, but some managerial and trade roles will decline.

The average annual recruitment requirement is estimated at 310, representing 0.5% of base 2018 employment, a lower ratio than for the UK (1.2%). Only one occupation, bricklayers, is flagged up as having a ratio to base employment of over 2.5%. In absolute terms the biggest annual average requirements are for bricklayers, other construction process managers, and other construction professionals and technical staff.

CSN predicts UK growth of 1.3% over the next five years, with 158,000 jobs to be created. Although UK growth is slightly down on the 1.7% predicted in 2017, the fall was expected and is not dramatic, when taking into account the economy slowing as a whole and uncertainty around Brexit.

Summary

Growth rate: Construction output growth in Northern Ireland is projected to average 0.5% a year over the 2018 to 2022 period.

Job creation: Employment is predicted to fall by 0.4% a year on average over the five-year period.

Main growth drivers/contracts: The engines of expansion are expected to be the housing (public and private) and repair & maintenance sectors.

Annual Recruitment Rate (ARR): Due to net outflows from Northern Ireland, there will still be an ARR estimated at 310, 0.5% of base 2018 employment.

In a UK context: CSN predicts UK growth of 1.3% over the next five years, with 158,000 jobs to be created. Although UK growth is slightly down on the 1.7% predicted in 2017, the fall was expected and is not dramatic, when taking into account the economy slowing as a whole and uncertainty around Brexit.